Which form is used to explain discrepancies related to payroll and tax returns?

Schedule D (Form 941) is used to explain discrepancies that arise related to payroll and tax returns, specifically concerning adjustments to previously filed payroll taxes. This form allows employers to report corrections to their Form 941 filings, which are the quarterly tax returns used to report income taxes, Social Security taxes, and Medicare taxes withheld from employee paychecks. When an employer identifies discrepancies in their payroll reporting—such as errors in tax calculations, incorrect employee information, or changes in eligibility for tax credits—Schedule D provides the necessary format to document these corrections clearly.

In contrast, Form W-2 is primarily used to report annual wages paid to employees and the taxes withheld, while Form 941 is used to report the quarterly payroll tax responsibilities without detailing corrections. Form W-4, on the other hand, is used by employees to indicate their tax withholding preferences to their employer and does not pertain to discrepancies in payroll or tax returns. Thus, Schedule D serves a unique role in rectifying errors in filed payroll tax returns.